PETALING JAYA: Selected semiconductor-related companies, led by Unisem (M) Bhd, chalked hefty gains, with an acceleration of the 5G network infrastructure deployment being the sector’s main catalyst.
The infrastructure deployment will require the products and services of such firms.
In a report issued on Unisem yesterday, CGS-CIMB noted that its recent nine-month 2020 (9M2020) results beat expectations at 82% and 86% of the research house’s and Bloomberg’s consensus estimates respectively, due to higher-than-expected utilisation.
Overall, core net profit rose 45% quarter-on-quarter from RM33.5mil in the second quarter (2Q20) to RM48.5mil in 3Q20.
The group also declared a two sen interim dividend per share in the quarter, in line with CGS-CIMB’s expectations.
“Unisem is entering a multi-year growth phase driven by strategic portfolio expansion for radio frequency (RF), power management and sensor products, ” it told clients.
It raised its FY2020- FY2022 earnings per share by 17%-24% for Unisem, to account for higher utilisation and new capacity expansion.
It said the group highlighted during a conference call that its Chengdu plant was nearing full production capacity and would likely be fully utilised by the first half of 2021, with new production lines gearing towards power management chip packages for data centres supporting the e-commerce industry.
“In addition, the group plans to start phase 3 of its expansion in the second half of 2021, which will raise its production floor area by 30%-40%.
“The group is also looking to utilise its additional capacity available in Ipoh by adding a new power amplifier module project for a key RF customer in 2021, ” said CGS-CIMB.
It is expecting Unisem to maintain a higher capex level in excess of RM200mil per year in 2020-2021 to support its new programmes for RF, power management chips and microphone sensors.
The research house has a target price of RM5.50 on the Unisem stock.
Meanwhile, industry-wise, analysts said key downside risks for semiconductor-related companies were trade tensions between the large economies and a prolonged pandemic which will hurt demand.
These can start to weigh heavily and very quickly on the sector’s valuations as investors will dump the shares based on a cloudy outlook of the sector.
That said, the medium-to long-term growth prospects for the semiconductor sector remain intact for now, owing largely to emerging technologies.
Did you find this article insightful?